Reinsurance companies were hit financially on both sides of their balance sheets because of the impact of the Covid-19 pandemic.

And there continues to be “significant uncertainty around the ultimate extent and distribution of Covid-19-related losses across the industry”, according to global professional services firm Aon.

Reinsurers faced “extreme market volatility” in the middle of the first half of the year, and collectively also incurred billions of dollars of losses relating to the pandemic.

Those are among the findings of Aon’s Reinsurance Aggregate report for the first half of 2020, which tracks the financial performance of 19 leading reinsurers. Included in that group are Bermudian-based Arch, Argo, Aspen, Axis, Everest Re, PartnerRe, RenRe, and Third Point Re.

Aon said that as a result of the impact of the health crisis an overall loss was sustained for the period “and it is already clear that the ARA [Aon’s Reinsurance Aggregate] will not cover its cost of capital in 2020”.

The ARA underwrites about half of the world’s non-life reinsurance premiums and a large majority of the life reinsurance premiums. Aon said it is a reasonable proxy for the sector as a whole.

Aon said the reinsurance group’s capital position remains robust, after a strong capital market recovery in the second quarter. Total capital for the ARA at the end of June was $255 billion, which was unchanged relative to the end of 2019. It consisted of $210 billion in equity, down 1 per cent, and $54 billion of debt, up 6 per cent.

Aon said some of the companies had raised new funds and others had attracted new alternative capital to support their business positions.

Among other highlights reported, property and casualty insurance and reinsurance gross premiums written rose by 5 per cent to $114 billion, assisted by risk-adjusted renewal rate increases.

The net combined ratio stood at 104.1 per cent. The report said Covid-19-related losses of $8.2 billion contributed 9.7 percentage points and natural catastrophe losses added another 2.8 percentage points.

Life and health reinsurance gross premiums written were $25 billion, and this segment generated additional Covid-19 related losses of $1 billion.

In its executive summary, Aon said: “There continues to be significant uncertainty around the ultimate extent and distribution of Covid-19-related losses across the industry, particularly in the area of business interruption, partly because the effects of the pandemic are ongoing, but also because there are many coverage issues to be resolved. This in turn means that there is currently heightened sensitivity to additional major loss activity and/or capital market volatility in the remainder of the year.”